PE Hub’s ongoing series on private equity firms investing in healthcare continues with insights from Andrew Adams, co-founder and managing partner of healthcare at Oak HC/FT. Adams focuses on growth equity and early-stage venture opportunities in healthcare. He joined Oak Investment Partners in 2003 and prior to that was a senior associate with Capital Resource Partners, a mezzanine capital firm where he focused on investments in healthcare and business services companies. He outlined Oak HC/FT’s approach to healthcare investing.
Investment strategy
“When I started in healthcare investing over 20 years ago, our strategy came to life through Athenahealth, which was the first company to capture our theme/thesis, and it opened our eyes to the convergence between technology and healthcare,” Adams told PE Hub. “The bigger theme for us has always been: Where can you use technology, a specialized clinical model or a modern software/tech-enabled services approach, to create quality outcomes and efficiency and better consumer and patient experience?”
“We invest in anything from a start-up to a growth buyout with a heavy emphasis on growth,” he said. “So, we have a lot of range and do everything in between. We don’t invest in product or devices that require FDA risk and no heavy brick-and-mortar services plays like acute hospitals.”
Technology in healthcare
The healthcare system is “complex, siloed, and has hardened workflows, so widespread change is hard,” Adams explained. For example, it’s “daunting” to take a “rip and replace” approach to claims systems developed by payers decades ago. “Payers also recognize that so much administrative stuff needs to be more efficient, especially in this labor environment,” he said. “There is more of an embrace as the solutions are out there that can generate a proven ROI. Tech has come a long way in this category.”
Differentiating from the competition
“We have backed well over 100 healthcare companies at this point. That level of experience plus the team we have built at Oak HC/FT, that in itself is a big differentiator and helps us stand out from the competition,” he said. “This is a regulated industry, so there are ebbs and flows, and having appreciation for how the system works is something we lean on quite a bit as well.”
Current trends
Adams said that one major opportunity is to invest in software that enables good clinical care, as it will help relieve a lot of pressure from a labor standpoint.
“Burnout, physician and administration and clinical burnout is a big deal for hospital systems, and anything you can automate, or use technology to leverage human capital, is going to remain a big focus area.”
“[It is] the same with payers – what can you automate and where can you help them redeploy that labor to other, higher value areas?”
“Everything we do has to deliver a great consumer experience, even if it’s not direct-to-consumer. Most of what we do sells into the large industry stakeholder, but that end-user experience matters. We look at service and tech providers to pharma, and that remains a very attractive area, as it is all about how you shorten development cycles and how you make commercialization of products more effective. Doing more of that virtually, as opposed to sending reps to the doctor’s office, makes that more effective.”
Economic challenges
“What gives you confidence investing in solutions to address inflation, supply-chain and labor force issues is that you are going to be able to measure an ROI. So, what you are going to be able to do, is there an ROI because they are helping this hospital system address a labor shortage or a quality issue? And then take that use case and generalize it across the country and in other systems.”
Current environment
“We are positive on the market dynamics, and healthcare is a growth market,” he said. “Healthcare is growing, and there is a lot of opportunity to improve the system without changing any sort of laws or regulations, a lot of common sense and business models that can drive a lot of efficiency for the system that will save money and quality of care and so much entrepreneurial energy. It used to be not cool to invest in healthcare, but now that is not the case. It is the perfect convergence of a massive growth market, increasing adaptation of tech and a real mission to improve the system, and that is exciting for an investor, because you can generate great returns and do a lot of great things for the healthcare system. It is an exciting time as the fundamentals for the market are extraordinary over the long-term.”
Firm facts
Founded in 2014 and based in Greenwich, Connecticut, Oak HC/FT is a venture and growth equity firm investing in companies driving transformation in healthcare and fintech. Oak HC/FT partners with leading entrepreneurs at every stage, from seed to growth, to build businesses that make a measurable, lasting impact on these industries. The firm has $3.3 billion in assets under management. The partners at the firm have had 41 realizations and 30 companies achieving valuations in excess of $1 billion.
Recent investments
Oak HC/FT invested in Reveleer in December of 2021 and Infusion for Health in November 2021. Both Reveleer and Infusion For Health reduce costs and improve outcomes for patients, fitting into Oak HC/FT’s healthcare investment philosophy. (See the sidebar, below, for more details.)
Recent exits
“When we make an investment, we like to have every exit opportunity on the table. For us, we exit most through strategic sale (about 50 percent), and the rest is split up between IPOs and sponsor buyouts. This way, we are not dependent on the IPO market. There is a lot of capital in PE looking for a platform, and if it’s good enough to be a public company, it’s certainly good enough to be a platform investment for PE firms to consolidate from. For an investor, an IPO is not a liquidity event full stop, so in those cases we’re simply continuing to support management to drive the growth strategy in the public market.”
Oak HC/FT exited Therapy Brands in May 2021 after investing in the company in July of 2018. KKR acquired majority interest; PSG participated in the transaction alongside KKR and remains a minority shareholder. Oak HC/FT exited OODA Health in June 2021 after investing in the company in 2018. It was acquired by Cedar for $425 million. Oak HC/FT exited Maestro Health in February 2018 as AXA acquired it. Oak HC/FT exited Limeade in December 2019 after completing an initial public offering on the Australian Securities Exchange. Oak HC/FT exited Aspire Health in June 2018 when it was acquired by Anthem.
Oak HC/FT’s healthcare portfolio highlights:
(Dates refer to initial investments.)
Advise Health Holdings: A Medicare concierge agency that focuses on serving seniors. (March 2021)
AllyAlign Health: A convener and owner of Medicare Advantage plans designed for senior housing residents (June 2021)
August Bioservices: A team of highly experienced scientists and professionals, providing a comprehensive service offering to advance drug discovery, pharmaceutical development and clinical manufacturing for the pharmaceutical and biotechnology industries. (July 2020)
Brightline: With a combination of in-person clinics and a coach-enabled technology platform, the Brightline model provides a live-and-digital care continuum that is redefining pediatric behavioral health. (December 2019)
CareBridge: Provides technology and services that assist health plans and states in caring for individuals receiving long-term support services. (January 2020)
Cerebral: The firm is building the future of mental health treatment through their comprehensive subscription and telehealth care model. (October 2020)
Circulo: Is the Medicaid insurance company of the future, providing tech-enabled, world-class care to the nation’s most underserved populations. (February 2021)
Cricket Health: Is a specialty kidney care provider of integrated nephrology and dialysis care for people with chronic kidney disease and End Stage Renal Disease. (September 2018)
Devoted Health: A new health care company serving seniors. (October 2017)
DispatchHealth: Has redefined health care delivery to offer on-demand acute care and advanced medical care for people of all ages in the comfort of their own home. (June 2020)
Eating Recovery Center: ERC and Pathlight Mood & Anxiety Center comprise the nation’s leading mental health care system dedicated to the treatment of eating disorders and primary mood, anxiety and trauma-related disorders. (October 2021)
Everside Health: A physician-access model of health care that improves patient care and satisfaction by providing convenient and unhurried patient-centered care and a broad scope of services. (August 2018)
Firefly Health: Is reshaping what great healthcare looks like. Firefly marries sophisticated technology with a thoughtful care team experience for continuous, intelligent care that changes behavior and drives value. (September 2019)
Galileo: A Health-net startup that re-imagines the doctor-patient relationship. (May 2019)
Groups Recover Together: Delivers opioid addiction recovery services that are proven to help individuals get their lives back on track. (May 2021)
Infusion for Health: A provider of adult and pediatric infusion services treating complex and chronic conditions. (November 2021)
Inscripta: Developing the world’s first benchtop platform for scalable digital genome engineering to empower scientists whose gene editing research is stifled by current technical and licensing limitations. (December 2019)
Komodo Health: Uses data and analytics to reduce disease burden. (January 2020)
Main Street Health: A value-based healthcare company focused exclusively on serving rural America. (June 2021)
Maven: The only virtual clinic dedicated to women’s and family health. (September 2018)
Modern Age: The mission is to help people live longer, healthier lives by giving them the tools to take control of their aging journey. (October 2021)
Noom: A psychology-based digital health platform powered by data, technology, and human coaches that helps millions of people meet their personal health and wellness goals from weight management to diabetes prevention to stress reduction. (May 2021)
Notable: An AI powered healthcare company that puts appointments on autopilot. (September 2018)
Olive: A healthcare-specific artificial intelligence and process automation company that empowers healthcare organizations to improve efficiency and patient care while reducing costly administrative errors. (July 2018)
OncoHealth: A digital health company dedicated to helping health plans, employers, providers, patients, and life science researchers navigate the physical, mental, and financial complexities of cancer through technology enabled services and real-world data analytics. (November 2018)
Precision for Medicine: The first global, precision-medicine, clinical research organization. (November 2020)
Quartet: A behavioral health technology company. (April 2015)
Reveleer: A healthcare software and services company that uses machine learning and intelligent automation technology to empower payers in all lines of business to take control over their quality improvement and risk adjustment programs. (December 2021)
Rialtic: The company helps the payer market regain control of payment accuracy as a core strength, enabling collaboration and reducing friction and overall costs. (December 2020)
Rubicon Founders: Building meaningful healthcare businesses that create enduring value by impacting people in a measurable way. (April 2021)
Syllable: Helps hospitals and patients communicate with each other. Using state-of-the-art natural language processing and machine-learned models, the company provides actionable information and self-service resources through web and phone. (June 2021)
Truepill: The company empowers its partners to deliver world-class patient experiences through its API-connected healthcare infrastructure. (September 2020)
Turning Point Healthcare Solutions: Provides an innovative suite of specialty care management services and technologies that enable health plans to improve the safety, quality and affordability of healthcare. (September 2021)
Unified Women’s Healthcare: Affiliated with the largest women’s healthcare organization in the United States, Unified Women’s Healthcare enables Ob-Gyn practices to grow and thrive through operational and business support services in a unique, yet complementary model. (December 2020)
Unite Us: An outcome-focused technology company that builds coordinated care networks connecting health and social service providers together. (March 2019)
US HealthVest: A provider of behavioral healthcare services. (June 2016)
Veda: The company saves healthcare companies millions annually by automating complex data processes.(July 2021)
Vesta Healthcare: The company transforms the in-home care and aging experience by providing elderly clients with personalized care planning, expert caregiver matching, custom mobile technology and proactive case management to improve older adults’ health and well-being while giving their families peace of mind. (January 2020)
VillageMD: A national primary care provider supporting physicians moving toward a primary care-led, high-value clinical model. (September 2015)
Wayspring: A value-based care entity exclusively focused on substance use disorder. (October 2016)
WithMe Health: A personalized medication guidance company. (January 2019)
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